2025 (10) TMI 334 - AT - Customs

Adjudication set aside; reassess assessable value under Valuation Rules Rule 9 and Rule 3(4), allow expert cross-examination under s.138B

CESTAT MUMBAI - AT set aside the impugned adjudication and remanded the matter for fresh adjudication, finding the assessable value improperly determined ... Over valuation of ‘Rolls-Royce’ car - re-determination of value by invoking rule 9 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - reliance placed upon the value of the goods in the market of exporting country, as reported in the certificate of Chartered Engineer - non-furnishing of any evidence of the said transaction being in compliance with the parameters set out in section 14 of Customs Act, 1962 - HELD THAT:- It is not in dispute that the assessable value was determined on the basis of recommendation of one of the Chartered Engineer who himself had relied upon internet research to ascertain probable price. Furthermore, it is seen that there was a substantial variance in the reported recommendations of two Chartered Engineers and there can be no doubt that the reliance placed on the second of these should have been contingent upon proper opportunity having been afforded for controverting the content therein. It is admitted that opportunity for cross-examination was not granted. Even though the documents called for from noticee, as narrated in the impugned order, had not been furnished, the consequence thereof would have been applicability of rule 3(4) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 which has not been complied with. In these circumstances, the impugned order deserve does not warrant affirmation. It is clear that the impugned order needs to be set aside for want of tenable conclusion and the notice re-visited with fresh adjudication. During the impugned adjudication, opportunity was not extended to the appellant herein to cross-examine the Chartered Engineer. While taking up the show cause notice for completion of the process of adjudication afresh, the original authority is also directed to ensure that the author of any report relied upon for valuation should be offered for cross-examination in accordance with section 138B of Customs Act, 1962. The appeal is allowed by way of remand. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether re-determination of assessable value under Rule 9 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 is permissible when based on market prices or internet-derived prices from the country of export. 2. Whether documentary material consisting of internet research/printouts is admissible and reliable evidence for customs valuation in absence of authentication and criteria under Section 138C and related Rules. 3. Whether denial of an opportunity to cross-examine the author of an expert/chartered engineer's valuation report used by customs violates principles of natural justice and Section 138B of the Customs Act, 1962. 4. Whether non-production by the importer of requested documents justifies re-determination of value without compliance with Rule 3(4) and other statutory safeguards. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of invoking Rule 9 based on export-country market prices or general market enquiries Legal framework: Rule 9 (Residual method) of the Customs Valuation Rules allows determination of value by reasonable means consistent with the Rules and on the basis of data available in India, subject to the proviso that the value so determined shall not exceed the price at which such or like goods are ordinarily sold in the course of international trade. Clause (2) expressly disallows reliance on certain bases, including 'the price of the goods on the domestic market of the country of exportation.' Precedent treatment: The Tribunal's prior analysis (in the judgment under review and referred authorities) emphasises that market price in India, or indiscriminate market enquiries including export-country domestic market prices, cannot form the basis under Rule 9. Decisions cited (including DR Soneta & Sons analysis) reject over-generalised invocation of Rule 9 to adopt market enquiries that do not reflect data 'available in India' and proximate to the importation. Interpretation and reasoning: The Court held that reliance on a market enquiry, especially market prices from the exporting country or general internet-derived market figures, undermines the statutory limitation in Rule 9(2)(iii). Rule 9 must be applied with the specific statutory constraints in mind; ad hoc reference to export-country or transnational market prices inconsistent with the rule is impermissible. The re-determined value which drew upon such market enquiries was therefore declared inconsistent with law. Ratio vs. Obiter: Ratio - Rule 9 cannot be invoked to re-determine value on the basis of domestic market prices of the country of export or broad market enquiries that are not data 'available in India' consistent with the Rules. The impugned valuation based on such enquiry is unsustainable. (This forms part of the operative conclusion remanding adjudication.) Conclusion: Invocation of Rule 9 on the basis of export-country market prices or generalized internet market enquiries was improper; the valuation so arrived at is not tenable and must be set aside for fresh adjudication consistent with Rule 9's limitations. Issue 2 - Admissibility and reliability of internet-based evidence for valuation Legal framework: Admissibility of electronic/computer printouts is governed by statutory and evidentiary provisions (including Section 138C contextually) and the general requirement of reliable, authenticated evidence when used for valuation. Precedent treatment: The Tribunal in Aggarwal Distributors held that internet documents are of doubtful evidentiary value where unsigned, unauthenticated and where the provenance, nature (retail/wholesale) and author are unknown; such materials cannot be accepted as reliable valuation evidence. That approach was applied by the Court to reject unsubstantiated internet research relied upon by the chartered engineer. Interpretation and reasoning: The Court noted that the chartered engineer's reliance on internet research rendered the recommendation tenuous because the internet material was not authenticated and did not satisfy necessary conditions for reliable valuation evidence. The department's acceptance of such material without appropriate verification or compliance with evidentiary safeguards is unacceptable. Ratio vs. Obiter: Ratio - Internet printouts or internet-sourced price indications lacking authentication, signature, provenance and clarity as to price-nature cannot form the basis for re-determination of customs value. Conclusion: Internet-derived material used to determine price is inadmissible unless authenticated and meeting requisite evidentiary standards; reliance on such material by the adjudicating authority rendered the valuation unsafe. Issue 3 - Right to cross-examine the author of the valuation report and principles of natural justice Legal framework: Natural justice requires that material adverse to a party be put to that party and an adequate opportunity be given to explain or controvert it; Section 138B of the Customs Act contemplates production and examination of persons whose reports are relied upon. Precedent treatment: The Court relied on established authorities holding that while there is no absolute right to cross-examination in all adjudications, refusal of a specific, justified request to cross-examine a witness whose report is to be used against a party will normally amount to breach of natural justice. Decisions referenced indicate that whether cross-examination is required depends on facts and circumstances and whether the other party is given adequate disclosure and opportunity to meet the case. Interpretation and reasoning: There was a substantial variance between two chartered engineers' reports in the record. The adjudicating authority accepted one report without affording opportunity to cross-examine its author despite the importer's request. Given the divergence in expert opinion and the significance of the report to valuation, the Court found that procedural fairness required that the author be made available for cross-examination prior to final adjudication. The Court also emphasised statutory direction to offer authors of relied-upon reports for cross-examination in accordance with Section 138B. Ratio vs. Obiter: Ratio - When valuation/adjudication materially depends on an expert report, and there is a request to controvert it (especially when conflicting expert opinions exist), denial of a reasonable opportunity to cross-examine the report's author amounts to breach of natural justice and requires fresh adjudication. Conclusion: Opportunity to cross-examine the author of the valuation report should have been afforded; its denial vitiates the adjudication and mandates remand for fresh proceedings with compliance to Section 138B and natural justice. Issue 4 - Consequence of non-production of documents by the importer and applicability of Rule 3(4) Legal framework: The Rules and Section 14 require that declared value be supported by transaction evidence; Rule 3(4) (as applied) addresses consequences when information is not furnished. Precedent treatment: The Court noted that failure to produce documents does not automatically validate a re-determined value without adherence to the statutory process; where documents are not produced, the adjudicating authority must still act consistent with statutory safeguards and procedural fairness. Interpretation and reasoning: Although the importer failed to produce certain documentary proofs, the Court held that consequence should have been determined with reference to Rule 3(4) and relevant statutory norms; merely re-determining value on the basis of an unauthoritative market enquiry and an untested expert report was impermissible. The absence of documents does not obviate the authority's duty to follow Rule 3(4) and to afford procedural opportunities, including confronting and testing adverse material. Ratio vs. Obiter: Ratio - Non-production of documents by the importer does not justify bypassing procedural requirements (including cross-examination and rules governing valuation); Rule 3(4) and other safeguards must be complied with. Conclusion: The impugned valuation could not be sustained simply because documents were not produced; the adjudicating authority must re-open the notice, ensure compliance with Rule 3(4), provide opportunity to contest expert reports, and proceed in accordance with statutory valuation provisions. Overall Disposition The impugned valuation and consequential orders based upon an internet-reliant expert report and without permitting cross-examination of the report's author are legally unsustainable. The decision is set aside and the matter remanded for fresh adjudication ensuring compliance with Rules 3 and 9, evidentiary standards for internet-sourced material, Section 138B (opportunity to examine authors of relied-upon reports), and principles of natural justice.